• Briefly Noted
  • A Majority of Advisers Are Investment, Not Financial, Planners

    Many advisers are misclassifying the types of services they provide, according to Cerulli Associates. While compiling their annual Quantitative Update: Advisors Metrics, a sourcebook for industry professionals, the research firm found differences between the types of services advisers said they provide and the services they actually do provide.

    The majority of advisers (59%) described themselves as providing financial planning services. After reviewing the services offered, Cerulli concluded that 56% of the total respondents were actually investment planners. Though many advisers do provide some financial planning services, most of their efforts are focused exclusively on asset accumulation strategies.

    A big reason why advisers focus on investment planning is their targeted client base. Cerulli says individuals holding investable assets of between $500,000 and $2 million comprise the largest pool of potential individual investor clients. Individuals with this level of wealth often are not in need of estate, charitable, business planning or private banking services, according to the research firm.

    Though the difference between “investment planning” and “financial planning” may sound minor, it can create confusion about what services an adviser is competent and not competent to provide. Cerulli called the lack of industry-wide standards for how advisers describe their services as potentially “significant for investors.”

    When using an investment professional, it is important to be clear about what services you are looking for. You should also ask specific questions about the professional’s experience and ability to provide the services you require. It may make more sense to use a group of advisers than to rely on a single adviser. This is would particularly be the case if you need assistance with estate planning and tax issues in addition to portfolio management. Also realize that the more complex your financial situation is, the more important it is that the professionals you hire coordinate with each other.

    Finally, make sure you understand how your adviser is being compensated. Cerulli found that more than 60% of investors are unaware of the type and amount of compensation their adviser receives. (The average annual fee for an account balance of $750,000 is 1.00% to 1.25% annually, according to Cerulli.)

    Sources: “59% of Advisors Perceive Themselves as Financial Planners, But Only 30% Truly Offer Planning Services,” Cerulli Report Press Release, January 19, 2012; Cerulli Quantitative Update: Advisor Metrics 2011.


    Nancy from MD posted over 4 years ago:

    Is this ever true. Too many prospects come into our office to discuss financial planning and tell us how their broker is their "financial planner." I always use that as an opportunity to educate people about the difference between an investment advisor only and an investor advisor who always provides comprehensive financial planning services as a core part of their practice.

    Am a member of The National Association of Personal Financial Advisors whereby the requirement is that you provide true comprehensive financial planning whether or not you provide investment management or not.

    Bill from CA posted over 4 years ago:

    After being directed into(Limited Partner Ships) in the 80's by(Financial Planner). My conclusion is that I could do a better job of handling our family investment's and also save on the(Fee's). P.S Most people that were into putting away deferred money that i knew did not know the difference between the SP-500&Dow.

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